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United States v. Morosco

United States Court of Appeals, First Circuit

May 12, 2016



Janice Bassil, with whom John Oh and Bassil, Klovee & Budreau, LLP, were on brief, for appellant Bernard J. Morosco.

Kerry A. Haberlin, with whom Rankin & Sultan was on brief, for appellant James H. Fitzpatrick.

Elizabeth D. Collery, Attorney, Criminal Division, Appellate Section, U.S. Department of Justice, with whom Leslie R. Caldwell, Assistant Attorney General, Sung-Hee Suh, Deputy Assistant Attorney General, Carmen M. Ortiz, United States Attorney, S. Theodore Merritt, Assistant United States Attorney, and Brian A. Pérez-Daple, Assistant United States Attorney, were on brief, for appellee.

Before Thompson, Circuit Judge, Souter, Associate Justice, [*] and Kayatta, Circuit Judge.

THOMPSON, Circuit Judge.


Years back, Michael McLaughlin, James Fitzpatrick, and Bernard Morosco worked for the Chelsea Housing Authority ("CHA"), a public agency principally responsible for providing low-income housing in Chelsea, Massachusetts. McLaughlin served as CHA's executive director, Fitzpatrick as CHA's director of modernization, and Morosco as CHA's paid consultant.

The federal Department of Housing and Urban Development ("HUD") funds three of CHA's properties - properties that have a combined total of about 350 housing units. As required by regulation, HUD periodically inspects a randomly-selected, "statistically valid sample of [] units" to help ensure that CHA's federally-funded housing is "decent, safe, sanitary . . . and in good repair." See 24 C.F.R. §§ 902.22(e), 902.20(a). The Real Estate Assessment Center ("REAC") - an agency within HUD - performs these evaluations, though it usually has REAC-trained independent contractors do the inspecting. Getting a high inspection score (90 or above) meant CHA would be considered a "high performer, " which meant fewer inspections (every two years rather than every year), less oversight, and more capital funding (a 3% annual increase). And CHA got designated a "high performer" in three consecutive inspections - in 2007, 2009, and 2011.

But not all was right at CHA, it turns out. McLaughlin abruptly resigned his post in 2011 after a newspaper reported that he made about $360, 000 a year, even though he told state officials that he made $160, 000. As he left, McLaughlin wrote himself checks from CHA's account for $200, 000, supposedly for unused leave - talk about throwing gasoline on a fire!

McLaughlin's salary scandal sparked a criminal investigation that led agents to Vitus Shum, CHA's finance director. Shum copped to helping McLaughlin with the salary scheme. Receiving immunity, Shum also later told agents about how he and others at CHA had rigged the HUD inspections. And his revelations helped a grand jury indict McLaughlin, Fitzpatrick, and Morosco for "knowingly and unlawfully" conspiring to defraud the United States and its agency, HUD - a violation of 18 U.S.C. § 371, which makes it a crime for "two or more persons [to] conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose." As for the indictment's allegations, all you need to know is this: Morosco was a REAC-inspection consultant - though he principally advised housing authorities on how to handle the REAC-inspection process. And using his REAC-inspector status, he (the indictment added) accessed the REAC database and software, figured out the sample of CHA units to be inspected, and passed the information on to Fitzpatrick, McLaughlin, or both - allowing CHA employees to get those units up to snuff before the inspectors came a-calling.

McLaughlin pleaded guilty and got a 12-month prison sentence and a $3, 000 fine, on top of the 36 months he previously got for pleading guilty to charges stemming from his salary chicanery. He did not testify at Fitzpatrick and Morosco's seven-day trial - Fitzpatrick did, but Morosco did not. A jury found them guilty as charged. And a judge later sentenced Fitzpatrick to 3 months in prison, plus 1 year of supervised release, and Morosco to 6 months in prison, followed by 1 year of supervised release.

Fitzpatrick and Morosco now appeal. Between them, they raise a battery of arguments - though not every one requires a lot of analysis. To make the opinion easier to follow, we organize our discussion thematically, issue-by-issue, providing more background as needed. And - spoiler alert - after working through their claims, we affirm.

Void-for-Vagueness Claim

Fitzpatrick and Morosco complain that section 371's defraud clause - criminalizing any conspiracy "to defraud the United States, or any agency thereof in any manner or for any purpose" - is unconstitutionally vague as applied to them. For those not in the know, a law is unconstitutionally vague if it fails to give ordinary people fair notice of what is forbidden, or if it fails to give the designated enforcers (police, prosecutors, judges, and juries) explicit standards (thus creating a risk of arbitrary enforcement). See Welch v. United States, No. 15-6418, 2016 WL 1551144, at *3 (U.S. Apr. 18, 2016). Of course the requisite fair warning can come from judicial decisions construing the law. See, e.g., United States v. Lanier, 520 U.S. 259, 266 (1997). And judges have no business junking a statute simply because we could have written it "with greater precision." Rose v. Locke, 423 U.S. 48, 49 (1975).

Helpfully, both sides agree - rightly - that Fitzpatrick and Morosco preserved their vagueness claim below (via a motion to dismiss the indictment) and that our review is de novo. See, e.g., United States v. Hussein, 351 F.3d 9, 14 (1st Cir. 2003). Also helpfully, both sides concede that binding precedent squarely forecloses this claim.[1] And we second that assessment.

Start with Fitzpatrick's and Morosco's most loudly trumpeted point. As they tell it, section 371's "defraud" clause only bans conspiracies to deprive the government of property and money by dishonest schemes, a reading (they add) that jibes with the common-law understanding of "defraud." And such a reading would help them (they continue) because they never scammed the government out of property or money. Unhappily for them, years' worth of Supreme Court precedent holds that section 371 "is not confined to fraud as that term has been defined in the common law, " see Dennis v. United States, 384 U.S. 855, 861 (1966); that defrauding the government under section 371 means obstructing the operation of any government agency by any "deceit, craft or trickery, or at least by means that are dishonest, " see Hammerschmidt v. United States, 265 U.S. 182, 188 (1924); and that the conspiracies need not aim to deprive the government of property or money, see id., because the act is written "broad enough . . . to include any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any" government "department, " see Haas v. Henkel, 216 U.S. 462, 479 (1910). Ever faithful to high-Court holding, our caselaw rejects the idea that section 371 only bars conspiracies to defraud the government out of property or money. See United States v. Barker Steel Co., 985 F.2d 1123, 1136 (1st Cir. 1993) (relying on Supreme-Court cases interpreting section 371 and its basically "similar predecessors"); Curley v. United States, 130 F. 1, 6-10 (1st Cir. 1904) (explaining that "defraud" in section 371's forerunner has a broader meaning than the common-law definition - and justifiably so because the statute's aim is to protect the government, and deceit can impair the workings of government even if the conspiracy does not take the government's property or money). Obviously then, this facet of Fitzpatrick's and Morosco's vagueness thesis goes nowhere.

Undaunted, Fitzpatrick and Morosco also suggest that because no statute or regulation criminalizes receiving a list of sample units before any HUD inspection, the government could not prosecute them under section 371. But our cases take all the wind out of their sails, holding as they do "that lawful activity may furnish the basis for a" section-371 conspiracy conviction. See United States v. Hurley, 957 F.2d 1, 4 (1st Cir. 1992) (finding unconvincing "defendants' asserted lack of 'fair warning' that their 'legal' conduct could be the basis for a criminal prosecution, " noting that "[t]he statutory prohibition against defrauding the government adequately put defendants on notice that a scheme designed to frustrate tax collection was prohibited"); accord Barker Steel Co., 985 F.2d at 1131 (emphasizing that section 371 bans both "(1) conspiracies to commit a specific offense against the United States, included elsewhere in the criminal code, and (2) conspiracies to defraud the United States, " and rejecting defendants' argument "that if no other federal law or regulation proscribes alleged conduct, then [they] cannot be held criminally responsible pursuant to § 371" - "[i]f the second clause were interpreted to require commission of a specific offense, it would have the same meaning as the first clause thus rendering the second clause redundant"); United States v. Tarvers, 833 F.2d 1068, 1075 (1st Cir. 1987) (stressing that section 371 "does not require that the means used to achieve the unlawful goal of the conspiracy be unlawful"). So this aspect of Fitzpatrick's and Morosco's vagueness theory also goes nowhere.

In what is basically a Hail Mary pass, Morosco argues that two fairly recent cases signal a new willingness on the high Court's part to entertain vagueness challenges - a willingness (the argument goes) that we must emulate. The two cases are (1) Skilling v. United States, 561 U.S. 358 (2010), limiting "honest services" fraud so that it only applies to defendants involved in either bribery or kickback schemes, and (2) Johnson v. United States, 135 S.Ct. 2551 (2015), declaring the Armed Career Criminal Act's residual clause - a provision dealing with crimes that "involve[] conduct that presents a serious potential risk of physical injury" - too vague to be enforced. His pass falls incomplete, however, and for a simple reason. Neither Skilling nor Johnson overruled the Haas/Hammerschmidt line of section-371 cases. And because overruling Supreme Court precedent is the Court's job, not ours, we must follow Haas/Hammerschmidt, etc. until the Court specifically tells us not to - something that is true even if these long-on-the-books cases are in tension with Skilling and Johnson (and we do not suggest that they are). See Hohn v. United States, 524 U.S. 236, 252–53 (1998) (declaring that Supreme Court "decisions remain binding precedent until [the Court] see[s] fit to reconsider them, regardless of whether subsequent cases have raised doubts about their continuing vitality"); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989) (instructing that "[i]f a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions"); see also United States v. Coplan, 703 F.3d 46, 61-62 (2d Cir. 2012) (rejecting the idea that a circuit court should use Skilling to rework controlling section-371 precedent, noting that lower courts should leave any reworking to the Supreme Court); Specter Motor Serv. v. Walsh, 139 F.2d 809, 823 (2d Cir. 1943) (L. Hand, J., dissenting) (cautioning lower courts against "embrac[ing] the exhilarating opportunity of anticipating" the overruling of a Supreme Court decision), vacated sub nom. Spector Motor Serv. v. McLaughlin, 323 U.S. 101 (1944).

With the vagueness issue out of the way, we press on.

Insufficient-Evidence Claim

Basically 1 page of Morosco's 68-page brief contains an attack on the judge's decision not to acquit him because of insufficient evidence. The parties correctly agree that he preserved the issue for appeal - so our review is de novo, taking all facts and inferences in the light most friendly to the government, and drawing all credibility choices in the government's favor as well. See, e.g., United States v. Munyenyezi, 781 F.3d 532, 536 (1st Cir. 2015). Sufficiency arguments seldom succeed. See United States v. Correa-Osorio, 784 F.3d 11, 26 (1st Cir. 2015). So it is here.

Morosco's main argument is that the evidence did not demonstrate that he had sabotaged HUD's quality-control efforts, meaning (his theory runs) that the government's case against him floundered because prosecutors never "show[ed] that a function of the government was targeted." But we beg to differ.

Viewed from a government-friendly perspective, the trial record reveals the following (we only hit the highlights):

. HUD fears that if housing-authority employees get advanced notice of which units REAC planned on inspecting, the entire inspection regime - designed to ensure the units were "decent, safe, sanitary . . . and in good repair, " remember, see 24 C.F.R. § 902.20(a) - would be compromised. And that is because tipped-off employees could then concentrate their energies and resources on just fixing those units up for review.
. Unsurprisingly then, REAC's inspector-training guide makes clear that inspectors cannot "[p]rovid[e] the property owner with the sample units ahead of time, so that the owner can clean up the units to be inspected, " and that such conduct constitutes "gaming" and "an attempt to cheat the system." Also unsurprisingly, to log on to REAC's server, inspectors have to accept what are called "Rules of Behavior" - rules that say that inspectors' user IDs and passwords "are to be used solely in connection with the performance of [their] responsibilities as set forth in [their] job description, contract or agreements with [HUD]." Tellingly, Morosco admitted in an email that as "an actively certified REAC inspector, " he was "very familiar with the REAC inspection process."
. In late 2006, Morosco told Fitzpatrick and Shum that he could access an REAC database and come up with the units REAC planned on inspecting in 2007 - even though he (Morosco) was not the inspector for that job. Fitzpatrick and Shum passed that juicy tidbit on to McLaughlin, who was gung-ho about the idea - McLaughlin badly wanted that "high performer" designation we talked about earlier. So Morosco downloaded key data for CHA's upcoming inspection from REAC's server (the data included "demographic" info, e.g., CHA's buildings, the units within the property), info he could get because of a glitch in the server's security features.
. Armed with all this data, Morosco generated the sample of the units REAC would inspect in 2007. He gave the list to Fitzpatrick, who then gave it to Shum. And Shum went through the list and matched the numbers there with CHA's rent roll (REAC only inspects "inhabited units").
. After getting clued in on the list, McLaughlin organized "SWAT teams." Comprised of CHA's management and administrative personnel (Fitzpatrick was involved), SWAT-team members checked and re-checked the to-be-inspected units - and those units only. CHA's maintenance department then fixed any problems flagged by the SWAT teams, thus ensuring that those units were "perfect." Meanwhile, maintenance work on the other units "slowed down."
. Inspection day 2007 eventually came and went, with the REAC inspector generating a list of to-be-inspected units that matched Morosco's and with REAC's scoring netting CHA the coveted "high performer" designation - which, again, meant fewer inspections and less oversight by HUD, and more money for CHA. A quick word about REAC's scoring system: Inspectors inspected not only the inside of the units but also the property's common areas, exterior, and building systems. Plus they inspected other elements, like CHA's management and finances. Without getting bogged down with the math, we simply note that unit inspections accounted for 10% of the overall score.
. The next two inspections - in 2009 and 2011 - involved the same basic script: Morosco would generate a list of to-be-inspected units, using data he got from REAC's server; he would give the list to Fitzpatrick, who would give it to Shum; McLaughlin would then send the SWAT teams to the selected units; and after the inspections, REAC would designate CHA a "high performer."
. During all this, Fitzpatrick and McLaughlin warned Shum not to tell a soul about how they had gotten the list. Fearing that CHA personnel might wonder why the SWAT and maintenance teams spent so much time and effort on only a few units, McLaughlin came up with a false cover story - that Shum had devised a "formula" for predicting which units REAC would check out. Fitzpatrick clued Shum in on that plan.
. At some point, Fitzpatrick got an email from an official with another housing authority asking if CHA used a REAC consultant. "I guess we need to talk to [McLaughlin] about whether we mention Bernie [Morosco] (and I'm sure we don't mention Bernie's 'extra services'!!!), " Fitzpatrick said in an email to a CHA colleague, adding "[t]his is a little bit of a dilemma!!" Also, in an email he sent to Morosco entitled "Information embargo, " Fitzpatrick "specifically . . . remind[ed] [Morosco] again" that a certain CHA manager "is not in the REAC inner circle." McLaughlin described that manager as having a "big mouth."
. Fitzpatrick also gave Morosco both his personal email address and Shum's so that communications about the inspection-rigging scheme would not be on CHA's email system. So despite what Morosco argues, the evidence sufficed for a reasonable jury to conclude that the conspiracy did target a legitimate HUD function - namely, assessing the physical condition (e.g., habitability) of CHA's federally-funded properties.

Noting that "the physical inspections of the units only constituted 10% of the overall score, " Morosco theorizes that it is "possible that the CHA would have been deemed a high performer regardless of [his] assistance."[2] But his theorizing is undone by our standard of review, "which is heavily stacked against him" - don't forget, we must take the facts in the light most flattering to the government's theory of the case, not his. See, e.g., United States v. Guerrier, 669 F.3d 1, 8 (1st Cir. 2011); United States v. Lee, 790 F.3d 12, 13 (1st Cir. 2015) (explaining that we must analyze the evidence "in the light most favorable to the jury's guilty verdict").

Ever persistent, Morosco contends that CHA fixed units "throughout the year and not just in preparation for the inspections, " which (he suggests) shows that any conspiracy did not "affect[]" or "undermine[]" CHA's "quality control." The claim is both wrong and irrelevant. It is wrong because the evidence - considered in the proper light (afresh, and in the light most agreeable to the government) - shows maintenance work on other units had "slowed down." And it is irrelevant because - as the government correctly notes - "the crime did not consist of having shabby housing units but of conspiring to keep HUD from accurately assessing them."

Finally, in something of an offhand suggestion, Morosco calls the evidence inadequate because it (supposedly) did not show "that [he] had an agreement with CHA, that he joined an illegal conspiracy with the required intent or that the purpose of the scheme was to defraud the government." This single-sentence suggestion is both unaccompanied by a discussion of the relevant evidence and unsupported by citation to legal authority. What we have here "'is hardly a serious treatment of . . . complex issue[s]'" and is "not sufficient to preserve these points for review" - so these arguments are waived for lack of adequate development in briefing. See Rodríguez v. Mun. of San Juan, 659 F.3d 168, 176 (1st Cir. 2011) (quoting Tayag v. Lahey Clinic Hosp., Inc., 632 F.3d 788, 792 (1st Cir. 2011)); see also United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (warning that litigants must do more than mention arguments "in the most skeletal way, leaving the court to do [their] work"). But even if we were inclined to overlook this waiver - and we are not - there is no merit to Morosco's arguments: given the ...

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